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Bullwhip Effect

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Autor:   •  November 29, 2010  •  3,098 Words (13 Pages)  •  372 Views

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By end March 2000, with a capacity of 32.6 mn lines and 26.5 mn working connections, India's telecommunication network ranked among the top 15 national networks in the world. However, for a country of India's size, with an estimated population of over a bn and a population growth rate of nearly 1.5% p.a., the current all-India telephone density of 2.8 telephone lines per 100 persons compares unfavorably with global benchmarks. The penetration is nearly 50 per 100 in the US, 10 per 100 in Brazil, with the global average being 11 per 100. With the present growth rate of about 20% p.a., India's teledensity is likely to touch only three per 100 by the end of 2002.

India represents one of the world's largest, underdeveloped telecom markets. It has a strong, high-consumption middle-class population of around 300 mn. The current low telephone penetration offers telecom companies substantial growth potential in India, along with the opportunity to adapt newer technologies for the feasible and continuing change that is sweeping through the industry worldwide.

The Department of Telecommunication (DoT), now known as Bharat Sanchar Nigam Ltd. (BSNL), is India's single largest provider of telecom services. Since 1992, when the telecom sector was opened to private players, the main thrust has been on achieving twin goals-promoting efficiency through competition; and establishing world-class networks to maximise universal access to telecom services.

The opening up of the telecom sector was greeted with a lot of optimism about the potential and spread of telecom services. Enthused, many private operators bid for telecom circles at high licence fees. However, the high investment requirements were not matched by a corresponding increase in revenues. With the subscriber base not swelling fast enough, and airtime usage remaining sluggish, business plans began to fail.

The telecom sector is now witnessing renewed interest, with the government initiating steps to improve infrastructure and increase the penetration rate. As the Indian telecom sector moves to wireless and data-based communication, competition and regulatory changes are taking place at a brisk pace and redefining business strategies. Business models are becoming more flexible and embracing new ways of doing business. The Indian regulatory authority, the Telecom Regulatory Authority of India (TRAI), has re-examined old laws.

The implementation of the New Telecom Policy (NTP) 1999, which allowed existing private operators to migrate from fixed-licence fee to a one-time entry fee plus revenue sharing, has expectedly led to the improvement in project viability of many basic and cellular service projects. It has set in motion a rapid and desirable transformation in the sector. There are already signs of many private operators breaking even and moving towards profits.

However, the privatisation process has been marred by delays, changes in policy guidelines, allegations of corruption, and a bureaucratic licensing regime. As a result, the initial momentum of privatisation appears to have slowed down considerably. The recent government policy initiative to open up National Long Distance (NLD) telephony to competition and end VSNL's monopoly over international long-distance telephony by April 2002 will remove hurdles (including the availability of bandwidth) and benefit the customer by improved performance, and a better quality and range of service.

There is still a huge wait-list of telephone connections to be provided. The main reason for this is that private sector participation has not been up to the government's expectations. Of the 13 licences that have been granted for basic services, only three have been operational (Hughes in Maharashtra, Bharti Telecom in Madhya Pradesh and Tata Teleservices in Andhra Pradesh). All the three companies have been unable to meet their service commitments, and, in most cases, have failed to deliver any service to the rural areas.



Telecom Service

The telecom sector is governed by outdated laws such as The Indian Telegraph Act, 1985 and the Indian Wireless Act, 1933. There is a need to revamp the existing laws to enable convergence in the sector.

India's telephone network, which was set up in 1851, was first managed by private firms. In 1943, the Indian government nationalised the sector. Until 1985, the Department of Posts and Telegraphs and the Ministry of Communications administered the telecommunications and postal services. Thereafter, the two services were separated, and the Department of Telecommunications (DoT) was created to oversee telecom services.

In 1986, two government-owned corporations, Mahanagar Telephone Nigam Ltd. (MTNL) and Videsh Sanchar Nigam Ltd. (VSNL), were established. The former took over the operations of the telecom and telex networks in Delhi and Mumbai, while the latter was made responsible for international operations.

Recently, on 1 October 2000, the government corporatised the Department of Telecom Services (DTS) to form Bharat Sanchar Nigam Ltd (BSNL).

Revised 9th Five Year Plan Target (1997-2002)

Item Unit Target

Net switching capacity mn lines 30.24

Direct exchange lines mn lines 22.57

Village public telephone '000 279

Transmission systems

Microwave & UHF Route Kms 70,000

Optical fibres Route Kms 270,000

Telecom Equipment

Until 1984, the manufacture of telecom equipment was exclusively reserved for government enterprises - Indian Telephone Industries for switching, transmission and terminal equipment; Hindustan Cables for cable products; and Hindustan Teleprinters for telex machines and modems. Thereafter, the government allowed the private sector to enter the manufacture of telephone instruments, cables, transmission equipment and small switching exchanges developed by the Centre for the Developmenf of Telecommunications (C-DoT). The manufacture of large exchanges has also been thrown open to the private sector. At present, the private sector is allowed to manufacture the entire range of telecom equipment.

Apart from a few large public and private sector companies, medium-sized units dominate the industry. The role of the public sector is on the decline and its presence is mainly


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